4 Reasons to Take Advantage of Section 179 Deduction 2023

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Are you looking to take full advantage of the Section 179 deduction 2023? With changes in the law coming this year, now is the time to jump on board and make use of this powerful tax incentive.

The ability to write off the total cost of qualifying business assets in the same year they’re purchased or placed into service makes it a great choice for small businesses looking to save money and reduce their taxable income.

Key Takeaways

  • The Section 179 tax deduction allows businesses to deduct the full purchase price of eligible asset purchases in a year. The deduction limit is $1,160,000 for the qualifying asset in 2023.
  • In 2023, businesses are limited to spending up to $2,890,000 on equipment. After that, the deduction will start to decrease dollar by dollar. When a business spends $4,500,000 or more on equipment the deduction will be gone.
  • Qualified Property must have been acquired by purchase and put into service more than 50% of business purposes during the tax year for which the deduction is claimed.

#1: Total deduction amount is up to $1,160,000 from Section 179 Deduction

The most significant benefit of using Section 179 of the IRS tax code is that it allows you to write off the entire purchase price of certain assets in one year on the total amount that can be deducted.

With a deduction limit in 2023, businesses can deduct up to $1,160,000 worth of eligible assets purchased or put into service. This significant increase from previous years is due to inflation adjustments for companies to maximize their deductions and get much-needed tax relief.

#2: The deduction applies to both new and used equipment

The great thing about this tax code is that it applies to both new and used asset purchases, as long as the used equipment is used for business purposes at least 50% of the time. So you don’t have to spend a fortune buying brand-new items to take advantage of this deduction.

You can claim it under this provision if you ensure the equipment meets the IRS criteria for eligible Property (tangible equipment used exclusively in your business). Here is the list of qualifying equipment:

  • Office furniture includes desks, chairs, partitions, filing cabinets, and bookcases.
  • Office equipment
  • Computers and software
  • Certain vehicles with a gross vehicle weight over 6,000 lbs
  • Business appliances, such as refrigerators, microwaves, air conditioners, and other similar items used in businesses.
  • Specific improvements to existing non-residential buildings

Section 179 Deduction Vehicle List in 2023:

The Sec 179 deduction applies to various vehicles used for business purposes. In 2023, the list of vehicles that might qualify includes the following:

  • Audi Q7
  • BMW X5, X6
  • Buick Enclave
  • Cadillac XT5, XT6, Escalade
  • Chevrolet Silverado, Suburban, Tahoe, Traverse
  • Chrysler Pacifica
  • Dodge Durango, Grand Caravan
  • Ford Expedition, Explorer, F-150, and larger
  • GMC Acadia, Sierra, Yukon
  • Honda Pilot 4WD, Odyssey
  • Infiniti QX80, QX56
  • Jeep Grand Cherokee
  • Land Rover Range Rover, Discovery
  • Lexus GX460, LX570
  • Lincoln MKT AWD, Navigator
  • Mercedes-Benz G550, GLS, GLE, Metris, Sprinter
  • Nissan Armada, NV 1500, NVP 3500, Titan
  • Porsche Cayenne
  • Tesla Model X
  • Toyota 4Runner, Landcruiser, Sequoia, Tundra

All these vehicles are eligible for Sec 179 deductions when purchased between January 1st, 2023, and December 31st, 2023.


#3: Section 179 allows full deduction of eligible asset purchases in one year.

This deduction allows businesses to fully deduct all eligible asset purchases in a single year without having to spread the deductions across multiple years like they would have had before section 179 was enacted by Congress.

For example, suppose you purchased $200,000 of qualifying equipment in 2023, which meets this deduction’s requirements. In that case, you can immediately claim the total of $200,000 instead of deducting a portion each year over multiple years.

However, following the phase-out threshold, if you spend more than $2.89 million on qualifying equipment, machinery, or other investments in 2023 can’t get the full deduction and can only claim up to your net income for the taxable year.

If your business spends $2.9 million on property, you’ll have gone over the limit by $10,000. That means the most you can claim for Section 179 expenses is $1.15 million ($1.08 million minus the extra $10,000).

Special Considerations on Spending Cap in 2023

The 2023 Spending Cap is $4,050,000 and any amount spent above that will not be eligible for the 179 deductions. This means you won’t get any of the tax savings available with those deductions if you go over the cap.

It is vital to remain current with the investment and deduction limits that can vary yearly. To ensure you are compliant with the rules regarding Section 179 deductions, it is wise to consult a tax advisor or refer to the federal tax code.

Additional Resources: Special Considerations with Bonus Depreciation

You can take advantage of Section 179 and Bonus Depreciation, but Sec 179 Deduction must apply first. You can claim this bonus on new capital equipment if you make more than the phase-out threshold ($2.89 million).

Does Bonus Depreciation change in 2023? In 2023, there will be a decrease from 100% to 80%.

How do you calculate bonus depreciation in 2023?

Formula: Your bonus depreciation = 80% x (total purchase price of qualifying assets – $1,160,000)

For example:

  • The asset costs $1,250,000, and the deduction limit in 2023 is $1,160,000
  • Amount of bonus depreciation:80% X (1,250,000 – 1,160,000) = $80 you can claim.

XOA Tax Tips: Before making large capital purchases, you should always talk to an accountant first. With professional tax advice, you can ensure deductions are estimated correctly according to the Section 179 code and bonus depreciation.

How to Claim Sec 179 Deduction and Bonus Depreciation?

You can claim your tax deduction and bonus depreciation with 80% of the cost of assets by using Form 4562.

Wrap-Up: Maximize Tax Savings with Section 179 Deductions

Section 179 is an excellent way for businesses to maximize their tax savings in 2023 by taking advantage of the full deduction on eligible asset purchases. With this knowledge, you should make an informed decision that allows you to get the most out of Section 179 deductions while still meeting all your financial goals!

It would be better to have a tax adviser to optimize your expenses. Are you taking full advantage of Section 179 deductions in 2023 but without the expertise? Contact XOA Tax Team for a free consultation today and maximize cash savings and avoid potential risks.

Frequently Asked Questions? (FAQs)

What vehicle qualifies for Section 179?

Vehicles that qualify for the Section 179 tax deduction include passenger vehicles, heavy SUVs, trucks, and vans used for business-related purposes at least 50% of the time.

What is not eligible for Section 179?

You can’t take a Section 179 deduction for real property. That includes land, buildings, permanent structures, and the components of permanent systems.

It also doesn’t apply to anything outside of the U.S. or anything used to furnish lodging. And you can’t use it on property acquired through gifts or bought from related parties.

Any property that isn’t personal won’t qualify either – like paved parking lots or fences.

Can I write off a 6000 lb vehicle in 2023?

Yes, you can write off a 6,000 lb vehicle in 2023. For that year, you can get up to $28,900 for the first-year deduction. After that, you’ll have to follow a regular depreciation schedule.

Can you take both Section 179 and bonus depreciation?

Yes, for the tax year 2022, you can take the Section 179 deduction and the bonus depreciation allowance. Section 179 must be applied first, and you can take over $1,160,000 in bonus depreciation.

What is the difference between Section 179 and bonus depreciation vehicles?

These are some critical differences between the two.

  • Section 179 allows businesses to deduct the total cost of qualifying assets, including vehicles, in the year they are purchased and placed into service up to a specific limit. In contrast, bonus depreciation allows businesses to deduct a percentage of the cost of qualifying assets in the year they are placed into service.
  • Both incentives can be used for vehicles, but bonus depreciation is only available for new cars, while Section 179 can be used for both new and used vehicles.
  • Section 179 has a limit on the total amount of deduction that a business can take, while bonus depreciation does not have any limit.

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